Shares of energy and
materials companies led declines as commodity prices fell. U.S. crude futures
slipped below $80 a barrel for the first time since October and the S&P
energy sector index .GSPE lost 4 percent. Investors said weak overseas demand
was responsible for the decline in those industries.
Stocks’
slide was accelerated by a bearish call from Goldman Sachs, which recommended
clients build short positions in the broad S&P 500 index on expectations of
more economic weakness.
“We
are recommending a short position in the S&P 500 index with a target of
1,285,” (roughly 5 percent below current levels), Goldman Sachs said in a note.
The
investment bank cited the Philly Fed’s mid-Atlantic factory index, which fell
to minus 16.6 in June, an unexpected contraction in the region’s factory
activity.
Semiconductor
stocks weighed on the Nasdaq after chipmaker Micron Technology Inc (MU.O)
posted a net loss for the fourth straight quarter. Micron lost 7.8 percent to
$5.65 and the PHLX semiconductor index .SOX dropped 4.1 percent.
Stocks
had enjoyed a two-week run that brought the S&P up more than 7 percent on
hopes for additional stimulus from the Federal Reserve.
Business
activity across the euro zone shrank for a fifth straight month in June and
Chinese manufacturing contracted, while weaker overseas demand slowed growth by
U.S. factories.
U.S.
manufacturing grew at its slowest pace in 11 months in June and the number of
Americans filing new applications for unemployment aid fell slightly last week,
further evidence the economy was weakening.
Other
reports on Thursday underscored the difficulty the economy was having breaking
out of a soft patch. Factory activity in the Mid-Atlantic region tumbled to a
10-month low in June and home resales slipped in May.
“Today’s
numbers are ugly. The economy is in another mid-year slump, growth will
struggle to breach 2 percent and the odds are rising that the Fed will need to
do more, probably as soon as its August meeting,” said Ryan Sweet, a senior
economist at Moody’s Analytics in West Chester Pennsylvania.
The
Federal Reserve on Wednesday moved to hold down borrowing costs by extending a
program to re-weight securities it holds toward longer maturities. However,
many economists think it will eventually launch a third round of bond purchases
in a more aggressive bid to spur a stronger recovery.
The
economy is going through a repeat of 2011 when growth stumbled in summer, with
Europe’s debt crisis and uncertainty over the course of U.S. fiscal policy
making businesses reluctant to hire.
Financial
information firm Markit said its U.S. “flash” manufacturing gauge fell to 52.9
in June from 54.0 in May. June’s reading was the lowest since last July
although it stayed above 50, indicating an expansion in activity.
For
the second straight month, weaker demand from Europe and large emerging markets
such as China dented sales. Markit said U.S. manufacturers reported the second
largest decline in new export orders since September 2009.
JOB
MARKET STAGNATING
In
a separate report, the Labor Department said initial claims for state
unemployment benefits slipped 2,000 last week to a seasonally adjusted 387,000.
However, a four-week moving average, considered a better measure of labor
market trends, hit the highest level since early December.
Greece’s
new government promised on Thursday to renegotiate the terms of the country’s
bailout without endangering its future in the euro, responding to intense
pressure to ease mounting social tensions but also risking a showdown with
European powers.
The
three-party coalition called for changes to the deal that is helping Greece
avoid bankruptcy after the announcement of an 18-member cabinet dominated by
the conservative New Democracy party of Prime Minister Antonis Samaras.
National
Bank Chairman Vassilis Rapanos was named finance minister and New Democracy
deputy leader Dimitris Avramopoulos became foreign minister.
Once
jailed for fighting Greece’s 1967-74 military dictatorship, Rapanos must now
cure its sick public finances while negotiating with euro zone leaders who are
losing patience with Athens after two multi-billion euro bailouts since 2010
that have failed to end the crisis.
Yesterday in Asia
Sydney fell 1.09
percent, or 44.8 points, to 4,087.6 and Seoul gave up 0.79 percent, or 14.97
points, to close at 1,889.15.
Hong Kong tumbled
1.30 percent, or 253.78 points, to 19,265.07 while Shanghai fell 1.40 percent,
or 32.00 points, to 2,260.88.
But
Tokyo closed 0.82 percent higher,
adding 71.76 points to 8,824.07 owing to a slightly weaker yen.
–
Mumbai ended up 0.8 percent, or
135.93 points, at 17,032.56.
ICICI
Bank rose 2.1 percent to 850.55 rupees, and State Bank of India ended 2.9
percent higher at 2,177.95.
–
Singapore closed down 0.89 percent,
or 25.53 points, at 2,830.15.
City
Developments fell 0.65 percent to Sg$10.71 and Fraser and Neave shed 1.43
percent to Sg$6.90.
–
Taipei fell 0.76 percent, or 55.58
points, to 7,279.05.
Smartphone
maker HTC fell 2.81 percent to Tw$380.0 while TSMC was 1.23 percent lower at
Tw$80.6.
–
Manila fell 0.72 percent, or 37.03
points, to 5,109.43.
SM
Investments dropped 2.11 percent to 695 pesos while Megaworld rose 2.88 percent
to 2.14 pesos and Alliance Global added 0.17 percent to 11.98 pesos.
–
Wellington closed 1.03 percent, or
35.40 points, lower at 3,409.39.
Telecom
fell 2.22 percent to NZ$2.425, Fletcher Building slipped 2.90 percent to
NZ$6.03 and Air New Zealand was steady at NZ$0.86.
–
Jakarta fell 1.07 percent, or 42.11
points, to 3,901.79.
Gas
distributor Gas Negara fell 4.3 percent to 3,375 rupiah, nickel and gold miner
Aneka Tambang slid 2.9 percent to 1,350 rupiah and Astra International lost
2.21 percent to 6,650 rupiah.
–
Kuala Lumpur eased 0.18 percent, or
2.96 points, to 1,601.43.
YTL
Corp lost 1.9 percent to 2.08 ringgit and MMC Corp eased 1.4 percent to 2.81
ringgit while Petronas Dagangan added 0.8 percent to 21.80 and YTL Power
International rose 0.6 percent to 1.74 ringgit.
–
Bangkok fell 1.21 percent, or 14.19
points, to 1,159.05.
PTT
fell 3.31 percent to 321 baht and Banpu lost 2.59 percent to 452 baht.
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